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Rules for Fonterra set to change

NZ NewswireNZ Newswire 29/05/2016
Fonterra © RNZ / Andrew McRae Fonterra

The process of changing the rules dairy giant Fonterra must follow in New Zealand is gaining momentum with the release of a discussion paper which should lead to a bill in parliament this year.

When Fonterra was created in 2001 it was a huge deal for New Zealand. The country's two largest dairy co-operatives and the New Zealand Dairy Board merged and an act of parliament was needed to deal with the competition issues in the home market.

Fonterra collected 96 per cent of the raw milk produced in a domestic industry that employed 48,000 people.

The rationale for creating Fonterra was that it would be a major player in global export markets, which it became.

On Sunday the government released a discussion paper to consult on changing the Dairy Industry Restructuring Act 2001 (DIRA) and regulations that govern how Fonterra behaves at home.

The document contains several options, including allowing Fonterra to decide not to collect milk from new dairy conversions in New Zealand.

Fonterra will also no longer have to sell milk at a regulated price to large, export-focused processors in New Zealand that it competes with.

The consultation document is a response to a Commerce Commission report released on March 1. By law Primary Industries Minister Nathan Guy was required to respond to that report within 90 days.

Final policy decisions will require a bill through parliament, which will likely be introduced in late 2016, the document says.

Under current regulations, from the middle of this year an independent processor ceases to be eligible for regulated milk from Fonterra once its own supply has reached 30 million litres for three consecutive seasons.

Mr Guy said New Zealand would have five large independent processors no longer eligible for DIRA milk from June this year.

Fonterra farmers can continue to sell 20 per cent of their milk to other processors like artisan cheese makers.

Submissions close on June 29 and several public meetings will be held during June.

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